An umbrella term that includes transexuals, transvestites, intersexed people, and just about anybody else who doesn't conform to the traditional model of sex/gender. "Transgender" is the most general, inclusive term.

It used to be called the gay community. Now we say the GLBT (gay, lesbian, bi, and transgendered) community.

The Urban Dictionary T-Shirt

Transgender is someone who like all the other gay subgroups has psychological variance in terms of how masculine or feminine they are socially in relation to their sex. They have developed a form of depression known as "gender dysphoria" and attempt to alter their body to change into the opposite sex.

Jim doesn't want to be a feminine boy so he calls himself transgender and dresses like a woman.

The Urban Dictionary T-Shirt

The Diagnostic and Statistical Manual of Mental Disorders (DSM), published by the American Psychiatric Association, lists gender dysphoria as a mental illness. The condition is also sometimes known as: gender identity disorder, gender incongruence or transgenderism. Contrary to the transgendered people raging on here it's not something that's "normal" and these people need therapy rather than surgery.

Jimmy thought he had been born as the wrong gender so he had a sex change and is now Transgender.